Wage growth remains steady, new government data out today finds, but most employers will likely stay cautious with pay strategies as economic uncertainty remains high.
The Employment Cost Index (ECI) increased 0.9% in the first quarter of 2025 after rising the same amount last quarter, according to Bureau of Labor Statistics (BLS) data released April 30. Wages and salaries increased 0.8% and benefit costs increased 1.2% from December 2024.
Year over year, compensation costs in the U.S. for private industry workers — including pay and benefits — rose 3.4%, down from 4.1% in March 2024. Wages and salaries increased 3.4% for the 12-month period ending in March 2025, compared with a 4.3% increase in March 2024, the BLS reported. The cost of benefits increased 3.5% for the 12-month period ending in March 2025, about the same as the 3.6% increase in March 2024. Inflation-adjusted wages and salaries increased 1% for the 12 months ending in March 2025.
Meanwhile, compensation costs for state and local government workers rose 4.3% for the 12-month period ending in March 2025 and increased 4.8% in March 2024.
The ECI measures changes in the cost of employees’ wages and benefits to employers over time. The Federal Reserve closely watches the ECI and the trajectory of wage growth as it considers interest rate changes.
Although the ECI shows stability in wage and benefits growth, the big issue for employers will be what compensation costs look like in the future, as the economic picture is in flux right now, said Sydney Ross, economic researcher at SHRM.
While the report shows what compensation costs looked like last quarter, “economic conditions have changed significantly since then,” she said. “Uncertainty surrounding future economic conditions, and whether broad changes to immigration and trade policies will be implemented, have employers feeling anxious regarding the direction of compensation costs this year and beyond.”
The BLS data comes on the heels of an April 2025 Current Events Pulse survey by SHRM, which polled 1,067 U.S.-based workers and 2,060 HR professionals and found that U.S. worker optimism remains near record lows. Due to economic volatility and recent political events, just 47% of U.S. workers expressed some degree of optimism about the future of the U.S. — the second-lowest level of optimism since tracking began in June 2024.
“In such an uncertain environment, it is likely that many employers are in ‘wait and see’ mode and will take a more cautious approach as they devise their pay and compensation strategies going forward,” Ross said. “The best course of action would be to stay as up-to-date as possible on policies that will impact their operations directly.”
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